The Financial Supervisory Commission (FSC) yesterday said that exposure to derivatives linked to yuan volatility has continued to decline as the Chinese currency fell to a new six-year low of 6.7 yuan against the US dollar.
In terms of total notional amounts and refundable deposits against client defaults, domestic banks’ exposure to yuan-linked target redemption forward (TRF) and double knock-outs (DKO) have continued to decline in the first eight months of this year, the commission said.
As of the end of August, the outstanding notional amount of TRF was NT$30.6 billion (US$967,960), down from NT$37 billion at the end of the first quarter, with the figure continuing to trend lower to NT$35.4 billion at the end of the first half, the commission said.
Total refundable deposits for TRF and DKO on a mark to market basis have fallen to NT$34.3 billion, compared with NT$100 billion at the end of last year and NT$34.2 billion and NT$42.7 billion at the end of the first and second quarter this year respectively, the commission said.
At the same time, banks have raised their provision against TRF defaults to NT$10.6 billion as of the end of August, with the figure jumping from NT$8.8 billion and NT$4.27 billion at the end of March and June respectively.
The commission said that the yuan-linked derivatives weathered a crisis in early January, when the yuan fell as low as 6.5 against the greenback, and that the markets would be more resilient against the latest bout of volatility.
Amid ongoing negotiations between investors and banks regarding settlement of massive losses triggered by the yuan’s weakening in the past two years, a local media report published yesterday pointed to another flareup as a local medium-sized industrial company has racked up as much as NT$20 billion in TRF-related losses.
“We found the amount listed in the report to be unlikely, and our investigation into the matter with banks did not uncover a company fitting the description,” an FSC official who declined to be identified said.
Regarding questions of whether clients were not fully informed of the derivative’s risks, the commission has ordered banks and affected investors who are in talks to move forward with the settlement timetable and begin either arbitration or mediation with third party institutions to two weeks.
The majority of larger-sized businesses utilize TRF as part of their foreign-exchange risk hedging strategy, but continued fallout from the troubled instrument has made the option less viable, leading to higher hedging costs, the official said.
He added that while many businesses view themselves as victims who were misled by banks, most are willing to shoulder their losses and preserve long-running relations with their lenders.
STEADY: Prices are to rebound following inventory rebuilding demand, TrendForce said, with Samsung Electronics Co further trimming capacity as it slashes DDR4 lines The contract prices of DRAM chips are to rise by as much as 18 percent sequentially this quarter — the first price upticks in about eight quarters — driven mainly by inventory rebuilding demand for DRAM chips used in mobile devices and PCs, TrendForce Corp (集邦科技) projected yesterday. The price rebound is led by a quarterly increase of mobile DRAM chips, which are to climb between 13 percent and 18 percent quarter-on-quarter this quarter, which has not been seen since the fourth quarter of 2021, the Taipei-based market researcher predicted. Likewise, the price of mainstream PC DDR4 DRAM is expected to bounce
CHINA NOT A FRIEND: ‘Newsflash: Democracy is good for your businesses,’ US Secretary of Commerce Gina Raimondo said as she gave a speech at a national defense forum US Secretary of Commerce Gina Raimondo on Saturday urged lawmakers, Silicon Valley and US allies to stop China from getting semiconductors and cutting-edge technologies key to national security. Speaking at an annual national defense forum in Simi Valley, California, Raimondo called Beijing “the biggest threat we’ve ever had” and stressed that “China is not our friend.” The world’s top two economies are locked in a fierce commercial and geopolitical rivalry, in which her department plays a leading role. In October, Raimondo unveiled a series of restrictions on the export of advanced chips to China, including those used in the development of artificial intelligence
SOLID FOUNDATION: Given its decades of expertise in megatronics, manufacturing and robotics, Japan has the wherewithal to create its own AI, Jensen Huang said Nvidia Corp plans to help build an artificial intelligence (AI) tech-related ecosystem in Japan to meet demand in a country eager to gain an edge in this emerging technology. The US company will seek to partner with Japanese research organizations, companies and start-ups to build factories for AI, Nvidia CEO Jensen Huang (黃仁勳) said yesterday during opening remarks in a meeting with Japanese Minister of Economy, Trade and Industry Yasutoshi Nishimura. The company is to set up an AI research laboratory, and invest in local start-ups and educate the public on using AI, Huang said. Huang earlier this week met with Japanese Prime
A Hong Kong court postponed a court hearing on troubled Chinese property developer Evergrande Group’s (恆大集團) winding-up petition scheduled for yesterday until Jan. 29. Evergrande is trying to win support from its creditors for a plan to restructure more than US$300 billion in debt to stave off liquidation. The company’s lawyer told the court it was requesting an adjournment to “refine” its new debt restructuring plan. The Hong Kong High Court has postponed the hearing over Evergrande’s potential liquidation several times. Judge Linda Chan (陳靜芬) had said in October that yesterday’s hearing would be the last before a decision is handed down. Chan